Martin Armstrong is a controversial market analyst who correctly predicted the 1987 crash, the top of the Japanese market, and many other market events … more or less to the day.
Many market timers think that Armstrong is one of the very best. Armstrong credits a computer program he created (which he calls “Socrates”) for the accuracy of his forecasting.
Armstrong’s background is even more dramatic because he was jailed for 11 years on trumped-up allegations of contempt, fraud and an alleged Ponzi scheme. Armstrong was ultimately released without any charges, and – as the documentary The Forecaster explains – the 11-year imprisonment was a way to try to pressure him to hand over his forecasting program.
Washington’s Blog sent a reporter to Armstrong’s annual conference in Orlando, Florida, to see what all the buzz is about …
Armstrong presented a wealth of very specific predicts about the timing of various markets and currencies worldwide (Armstrong’s models are proprietary, so we won’t discuss them here).
But Armstrong also made a number of interesting economic and political comments which make us think he’s pretty darn smart …
For example, he said that world capital flows peaked in 2000, and – along with the world economy – have actually been declining ever since. Armstrong said that some individual countries’ capital flows went up until 2007 … but even they have been declining since then.
Armstrong predicted that the government bond market has peaked. Armstrong said it’s better to move out of government debt and into private debt. Specifically, when governments default, you get nothing. But when private companies default, there are still some tangible assets to be divvied up. He suggested buying AA or AAA blue chip corporate debt.
He also forecast that Europe will become even more of a basket case, driving huge amounts of capital flooding into the U.S., creating a giant U.S. stock market bubble.
But Armstrong predicts that – like all bubbles – the U.S. stock market will end up deflating within a couple of years.
Specifically, Armstrong tells Washington’s Blog:
The rush of cash into the US has little place to go but equities. The bubble would be indicated when we exceed the 23,000 level and if we achieve a monetary reform where the dollar is replaced with a new reserve currency basket. The trade problems Trump will face are because those in Washington do not grasp the role of currency.
I do not see a 1929 type crash. That is when the private sector melts down. This time it will be government. That is why most analysts have been wrong. They keep preaching the same scenario, gold up, stocks, down, dollar to zero.
They do not understand that sometimes governments go bust and when that happens, you get strange results that do not mirror 1929.
In terms of Brexit and the EU, Armstrong said:
While all the hype how Britain will fail because it has left the EU, there is absolutely no evidence that such a result will unfold. The EU is in a major crisis and the system cannot possibly work … the only way Britain will not be dragged down with Europe was to exit the EU.
Their own data shows that GDP growth annually peaked in 1973 PRIOR to joining the EU. So much for this idea that [trade blocks] are everything.
On the push for eliminating cash, Armstrong said:
Their theory is that cash is what’s preventing them from completely controlling the economy.
The propaganda is “cash is for criminals”.
They have this view that if they can eliminate cash, they can get whatever they want in taxes out of you. You have no way of doing a bank run … there’s no money.
And they can take interest rates negative.
Armstrong slammed The Foreign Account Tax Compliance Act (“Fatca”), saying that it’s just a way for governments to try to tax and grab people’s money … and that it’s depressing money flows, and thus the global economy.
In terms of negative interest rates in Europe, Armstrong said that European banks just sent cash to their American affiliates, who then parked excess reserves at Fed. So European banks weren’t subject to negative rates. Instead, they got paid by Fed to park their money. (Background.) European banks also play the mismatch in financial year ends between Europe and the UK.
And Armstrong says that the economic system is broken because politicians are motivated to ignore the real world so they can continue manipulating things for their own benefit:
The bottom-line crisis that we face is a crisis in philosophy. There is no interest in studying HOW the economy actually functions. Where’s the fun in that?
Economists line up with their hands out looking for money and spin wonderful stories about how government can manipulate the world to its benefit. Whatever the governments pays them to suggest!
Government has no interest in Laizzez-faire economics for that maintains that the economy is far too complex for government to interfere. Governments embrace Marx and Keynes because they gave politicians the idea that they can manipulate the world for their political gain.
See this for more on Armstrong.